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Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting.

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Hayek Bikes prepares the income statement under variable costing for its managerial reports, and it prepares the income statement under absorption costing for external reporting. For its first month of operations, 350 bikes were produced and 225 were sold; this left 125 bikes in ending inventory. The income statement information under variable costing follows. Sales (225 * $1,750) Variable product cost (225 * $650) Variable selling and administrative expenses (225 * $60) Contribution margin Fixed overhead cost Fixed selling and administrative expense Net income $ 393,750 146,250 13,500 234,000 59,500 90,000 $ 84,500 1. Prepare this company's income statement for its first month of operations under absorption costing. 2. Fill in the blanks: Complete this question by entering your answers in the tabs below. Required 1 Required 2 Prepare an income statement for the current year under absorption costing. KENZI KAYAKING Absorption Costing Income Statement Sales Less: Cost of goods sold Variable product costs Fixed overhead costs Cost of goods sold Gross margin Selling general and administrative expenses Fixed selling and administrative costs Variable selling and administrative expenses Net income (loss) Net income under absorption costing is higher than net income under variable costing by: Fixed costs added to inventory Required 1 Required 2 Fill in the blanks: The dollar difference in variable costing income and absorption costing income = units fixed overhead per unit

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